Efficiency-boosting mechanism for PSE moving ahead

Remand on secondary issue doesn’t undo historic ruling that lets utility help its customers cut their power use

OLYMPIA, Wash. – Thurston County Superior Court Judge Murphy has rejected the primary challenges to an historic regulatory ruling that will allow Puget Sound Energy to reduce consumers’ energy use without undermining its financial health.

Last June, the Washington Utilities and Transportation Commission, which regulates Washington’s investor-owned utilities, approved a comprehensive “decoupling” provision that will help the utility achieve even greater energy efficiency savings while making its revenue more predictable. Utility profits are generally tied to (coupled with) sales. Successful energy efficiency programs reduce sales, making it difficult for the utility to cover its costs. The UTC order prevents PSE from being punished financially for improving its energy efficiency programs by removing the link between customer energy use and the utility’s ability to recover its costs for providing electric service.

Industrial Customers of Northwest Utilities and the Washington Attorney General’s Office of Public Counsel mounted a court challenge, claiming that the UTC violated ratemaking principles in issuing the order.

Judge Murphy rejected two of the three challenges to the final order. Her ruling, issued last month, looks favorably on both the groundbreaking decoupling mechanism and on most aspects of the UTC’s process for approving it. She did remand the narrow issue of PSE’s rate of return to the UTC for consideration of additional evidence.

“We are pleased that the decoupling mechanism remains in effect,” said policy director Nancy Hirsh of the NW Energy Coalition, the primary public-interest advocate for the decoupling decision. “We will continue to work with all parties to secure this incredible breakthrough that paves the way for PSE to boost energy efficiency savings and make low-income families’ homes more livable.”

Amanda Goodin, the Earthjustice attorney who represented the Coalition on the decoupling aspect of the case and filed a brief supporting the UTC decision, said the decision “sends a clear signal that energy efficiency is the way forward in Washington. Increasing energy efficiency is cheaper than building a new power plant and avoids tons of unnecessary pollution. It’s really a no-brainer.”

Goodin expressed disappointment in the narrow ruling on return on equity, but was confident the Commission could quickly resolve the issue on remand.

“This is a win for everyone who cares about reliable, affordable and clean energy services in the PSE service territory,” said Natural Resources Defense Council senior attorney Ralph Cavanagh, who provided expert testimony on behalf of the Coalition. “It’s also an important precedent for the rest of the state, region and nation. We are pleased the court upheld the Commission’s authority to end a long-standing conflict of interest between PSE shareholders and customers over efficiency measures that reduce both polluting emissions and utility bills.”

With the financial disincentive to efficiency removed, PSE will be on a course to increase electricity savings by at least 5% from its already robust conservation programs, which include such measures as rebates for high-efficiency appliances and insulation projects. PSE will make available an additional $500,000 for weatherization of low-income homes. The order also requires the utility to increase its low-income bill assistance funding by $1.5 million, to a total of $21.7 million each year.

“By taking advantage of the company’s energy efficiency programs customers can lower their bills even when rates rise a bit,” Hirsh noted. “That’s why removing a barrier to those programs and increasing PSE’s commitment to low-income weatherization and bill assistance is so important.”

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The NW Energy Coalition, the region’s foremost clean energy policy advocacy association, is a 32-year-old alliance of more than 110 environmental, labor, civic, consumer, faith and human service groups as well as progressive utilities and businesses in Oregon, Montana, Idaho, Washington state and British Columbia committed to meeting new power needs with energy efficiency and new, clean renewable energy.

The Natural Resources Defense Council (NRDC) is an international nonprofit environmental organization with more than 1.4 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world’s natural resources, public health, and the environment. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Livingston, Montana, and Beijing. Visit us at www.nrdc.org and follow us on Twitter @NRDC.

Earthjustice is a non-profit public interest law organization dedicated to protecting the magnificent places, natural resources, and wildlife of this earth, and to defending the right of all people to a healthy environment.